Book Review: Retirement Income for Life by Fred Vettese
When our retirement income planning clients tell us they’ve read Retirement Income for Life, or one of Fred Vettese’s other books on retiring in Canada, I usually get very excited.
No, it’s not because we’re huge book nerds at Spring and love talking to people who’ve read the same stuff we have (although we are and we do).
I get excited when clients read books like this because it means two very specific things:
First, it means that they’re taking retirement seriously and are likely to be engaged in the process. They’re just like eager students who have done the homework and are ready to learn – an educator’s dream.
Second, it means they’ve got at least a basic grasp of some of the harder concepts that come with retirement income planning, like:
- What the merits of deferring Canada Pension Plan benefits might be
- The value of protecting against the worst-case investment scenario before trying to reach for the best-case investment scenario
- What annuities are and how they might fit into a plan (and when)
- The importance of planning for survivors and not just couples
There’s plenty of information on saving up for retirement, but precious little evidence-based information on spending them (outside of academia, that is). As a Canadian actuary, Vettese focuses solely on designing a decumulation strategy with the highest probability of success. Pre-retirees who understand at least the basic concepts are much more likely to execute them than people whose first (and second through fifth) response to the idea of an annuity are “NO WAY!”
I do wish that a book with the subtitle “Getting More Without Saving More” had devoted more than a single paragraph (on page 16, if you’re looking) to people who will retire with a low income. If “most, if not all of your retirement income will come from defined benefit sources like CPP, OAS, and other government income programs” you need a smart decumulation strategy as much as your higher income counterparts do…you just need an entirely opposite strategy to the one described in this book.
A final quibble with an otherwise excellent book is the ease with which spending less from one year to the next is offered as a strategy for systematic withdrawal plans. On paper, reducing spending by a couple of hundred bucks a month may seem like a relatively straightforward exercise, especially if you put the work into identifying your minimum comfortable spending level as well as your nice-to-have desired spending level. In real life, however, changes to spending can be difficult to execute unless there’s a well-developed infrastructure in place.
Who should read it?
Anyone who does not have a defined benefit pension plan and is within five years of retirement should read this book, and any financial planners, accountants, and investment salespeople who ever advise clients on retirement income should crack it open too.
Who shouldn’t read it?
If you are going to have a low income in retirement (think somewhere around or below $19,000 per year as a single person or $25,000 as a couple), this book is the literal opposite of the advice you should follow. Put it down and back away slowly! Instead, check out the Retiring on a Low Income resources from John Stapleton.
If you only have time to read one chapter:
Chapter 11 on deferring Canada Pension Plan benefits is a must-read (with a big caveat that it doesn’t apply to people who will retire on a low income).
This is a great chapter because it does three things at once:
- It articulates the basic CPP program for people who don’t know much about it
- It explains you shouldn’t worry that CPP is going to go bankrupt just because you heard the same thing about US Social Security (you might be surprised how often that comes up, accompanied by a request to leave CPP calculations out of retirement plans altogether)
- It provides evidence-based reasoning for delaying CPP for most people
If you only have time to read one paragraph:
“How a question is asked can fundamentally change our decision even though the basic underlying facts that are presented to us are the same. The framing effect has some major implications for retirement planning. Over time, we develop strong feelings about certain concepts, institutions or products. Some we perceive as intrinsically good and others as equally bad. If your financial advisor asked if you want to buy an annuity or defer CPP without explaining the impact in detail, your answer would almost certainly be no. Alternatively, if she asks if you are prepared to make use of all the available tools to achieve your financial goals, your answer might be different.”
(Chapter 17: A Recap of the Five Enhancements, pages 151-152)
If you only have time to read one sentence:
“If all [your] planner is doing is helping you set your asset mix, the exercise is practically a waste of time.”
(Chapter 13: Fine-Tuning the Asset Mix, page 117)